Tech resurgence sends Wall Street higher

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NEW YORK (Reuters) - Stocks rose on Tuesday as investors bought beaten-down shares of technology heavyweights such as IBM (IBM.N: Quote, Profile, Research) and Microsoft Corp (MSFT.O: Quote, Profile, Research) on hopes that the tech sector would weather the impact of the credit crisis.

An upbeat profit forecast from design software maker Adobe Systems Inc (ADBE.O: Quote, Profile, Research) lifted optimism in the tech sector, a day after the Nasdaq slid more than 2 percent.

Earlier, the market struggled to hold gains as Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) comments about its business outlook fueled uncertainty about the impact of the housing slump on bank profits.

In addition, shares of companies likely to better withstand a slowing economy, such as drug companies, rose. Pfizer Inc (PFE.N: Quote, Profile, Research) gained 1.7 percent to rank among the standouts on both the Dow and the S&P 500.

"There's some bargain hunting and some people feel that, despite the slowdown in some of the economic indicators, we're OK," said Michael Metz, chief investment strategist at Oppenheimer & Co. in New York. "People are looking for re-entry points, but .... they are very cautious about going back into the financials."

The Dow Jones industrial average .DJI advanced 65.27 points, or 0.50 percent, to 13,232.47. The Standard & Poor's 500 Index .SPX gained 9.08 points, or 0.63 percent, to close at 1,454.98.

The Nasdaq Composite Index .IXIC jumped 21.57 points, or 0.84 percent, at 2,596.03, snapping a three-day losing streak.

Shares of International Business Machines Corp, the technology services company, were the Dow's top advancer, finishing up 1.7 percent at $106.31 on the New York Stock Exchange.

IBM was among tech bellwethers that led a sell-off among tech shares on Monday as investors fretted about the outlook for business spending.

On the Nasdaq, shares of software maker Microsoft climbed 1.02 percent to $34.74, making the stock the biggest contributor to the Nasdaq's advance. Shares of Adobe finished up 2.8 percent at $42.03.

Adobe issued a fiscal first-quarter profit forecast late on Monday that topped Wall Street expectations on strong software sales.

Oracle Corp (ORCL.O: Quote, Profile, Research), the world's third-largest software maker, was another standout, ending up 1.5 percent at $21.25 on the Nasdaq. Oracle is scheduled to report quarterly results on Wednesday.

But after the bell Palm Inc (PALM.O: Quote, Profile, Research) gave an outlook that disappointed investors.

Palm, the maker of Treo smart phones, posted a quarterly loss and forecast lower-than-expected revenue in the current period, sending its shares down almost 10 percent.

During the regular session, shares of Pfizer, the world's biggest drug maker, gained 1.7 percent to $23.37 on the NYSE.

Shares of Goldman Sachs, the world's largest securities firm by market value, meanwhile, ended down 3.4 percent at $201.51 on the NYSE.

Although Goldman Sachs, the largest U.S. securities firm, reported earnings that topped forecasts, it said it was being cautious about its near-term business outlook. Traders said the company failed to reassure investors that the financial sector had seen the worst of the credit market meltdown.

During the session Goldman shares briefly traded below the $200 mark for the first time since mid-September. They ended the day a top drag on the S&P 500, followed by those of JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), which also led the Dow's losers.

Shares of JPMorgan, the No. 3 U.S. bank, ended down 1.4 percent at $43.90.

Investors fear that the credit crisis could hamper lending to businesses and consumers, compounding the outlook for the economy as the housing market deteriorates. There are also growing fears about the specter of rising inflation.

Among the latest economic data, a report showed on Tuesday that U.S. housing starts fell 3.7 percent in November, with construction of single-family homes sliding to the lowest level in more than 16 years as builders scrambled to cope with a deep drop in sales.

Trading was below average on the New York Stock Exchange, with about 1.49 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on the Nasdaq about 2.04 billion shares traded, above last year's daily average of 2.02 billion.

Advancing stocks outnumbered declining ones by a ratio of about 8 to 5 on the NYSE and by 3 to 2 on the Nasdaq.